Which legal principle is crucial in real estate appraisal?

The principle of market value is crucial in real estate appraisal because it reflects the most probable price that a property would sell for in a competitive and open market under normal conditions. This concept is foundational in appraisal practice and serves as a benchmark for determining how much a property is worth based on factors such as recent sales of comparable properties, the condition of the property, and current market conditions.

Market value incorporates the interplay of supply and demand, allowing appraisers to assess what buyers are willing to pay for properties like the one being appraised. It represents a collective valuation by the market rather than the idiosyncratic views of individual owners or current architectural styles, which can fluctuate based on personal taste or trends and not necessarily reflect intrinsic property value.

Understanding market value is essential for appraisers to provide accurate and fair assessments that are useful for buyers, sellers, lenders, and investors, ensuring transactions are based on reliable and objective data.